BusinessMirror

Oil set for weekly gain as vac­cine op­ti­mism out­weighs lock­downs

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OIL is poised for a third weekly gain in New York as pos­i­tive Covid- 19 vac­cine de­vel­op­ments out­weighed con­cerns about stricter re­stric­tions due to a surge in global in­fec­tions that will dampen fuel de­mand.

Fu­tures are back near $ 42 a bar­rel and are set for the long­est run of weekly gains since Au­gust fol­low­ing news of an­other vac­cine break­through on Mon­day, while fur­ther anal­y­sis showed Pfizer Inc.’s shot was more ef­fec­tive than ini­tially flagged. Vac­cine op­ti­mism off­set a grim pic­ture emerg­ing across the US with Amer­i­cans urged not to travel for Thanks­giv­ing, Cal­i­for­nia or­der­ing a one- month cur­few and New York clos­ing pub­lic schools as virus cases surged.

Shrink­ing time­spreads, mean­while, are sig­nal­ing con­cerns about over- sup­ply are eas­ing. The three­month time spread for Brent crude in Lon­don was 46 cents a bar­rel in con­tango, the nar­row­est since July.

Still, the oil mar­ket is fac­ing an un­cer­tain de­mand re­cov­ery, with a resur­gent virus in the US and Europe prompt­ing tighter re­stric­tions and keep­ing con­sump­tion and prices in check, even as parts of Asia re­bounds strongly. The flar­ing out­break will be a key is­sue for Opec+ when it meets at the end of the month to de­cide on whether to de­lay a planned eas­ing of cuts early next year.

“The vac­cine news sup­ports our view that world oil de­mand will move higher over the course of 2021,” said Vic­tor Shum, vice pres­i­dent of en­ergy con­sult­ing at IHS Markit. “There is prom­ise of a bet­ter time, but the im­me­di­ate fu­ture is grim. There is an alarm­ing rate of new Covid- 19 cases in North Amer­ica and Europe.”

Lock­downs aside, other set­backs in­clud­ing health ex­perts find­ing no ev­i­dence that a widely used drug im­proved sur­vival of Covid- 19 pa­tients and a dis­pute over stim­u­lus from the Fed­eral Re­serve also con­trib­uted to bear­ish sen­ti­ment.

Ahead of the Opec+ meet­ing, which could see a pos­si­ble ex­ten­sion of out­put cuts by threeto- six months, a buy­ing spree by Asian re­fin­ers is com­pli­cat­ing the out­look amid surg­ing pro­duc­tion from coun­tries such as Libya. The African na­tion is now pump­ing 1.25 mil­lion bar­rels a day, with France’s To­tal SE in talks to in­crease en­ergy in­vest­ment in the coun­try.

The United Arab Emi­rates, mean­while, tried to ease a spat with its Opec+ part­ners on Thurs­day, af­ter of­fi­cials pri­vately ques­tioned the ben­e­fit of its mem­ber­ship of the group. The UAE “has al­ways been a com­mit­ted mem­ber,” En­ergy Min­is­ter Suhail Al- Mazrouei said.

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